Paying consistent extra payments toward your loan principal provides big returns. People employ various techniques to meet this goal. For many people,Perhaps the simplest way to keep track is by making 1 extra payment per year. However, many people won't be able to pull off such a large extra expense, so dividing one additional payment into twelve extra monthly payments works as well. Another option is to pay half of your payment every other week. The effect here is that you will make one additional monthly payment every year. These options differ slightly in reducing the total interest paid and reducing payback length, but each will significantly shorten the duration of your mortgage and lower the total interest paid over the duration of the loan.
It may not be possible for you to pay extra every month or even every year. Remember that almost all mortgage contracts will permit you to make additional payments to your principal at any point during repayment. You can take advantage of this provision to pay extra on your mortgage principal when you get some extra money.
Here's an example: a few years after moving into your home, you receive a very large tax refund,a large inheritance, or a non-taxable cash gift; , you could apply a portion of this money toward your mortgage loan principal, resulting in enormous savings and a shortened loan period. For most loans, even this small amount, paid early enough in the loan period, could offer huge savings in interest and in the duration of the loan.
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